Shareholding and Financial Advisory Division (SFAD) · The Shareholding and Financial Advisory Division (SFAD) consists of a team of c. 20 professionals with a mix of capital markets,

Shareholding and Financial Advisory Division (SFAD)

Fact Book: Q1 2019

Section 1: Introduction

Section 2: Economic Update

Section 3: State Bank Investments

Section 4: NAMA / HBFI

Section 5: Credit Unions

Section 6: IBRC

Section 7: Financial Advisory

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3 An Roinn Airgeadais | Department of Finance

Shareholding and Financial Advisory Division

SFAD Roles & Responsibilities

SFA

D

Developing and recommending to the Minister strategies for returning the banks to private ownership Realising value for the taxpayer by executing share disposals Monitoring bank performance and stock market trends through regular interaction with management,

investors and market participants Protecting and exercising the Minister’s rights while respecting bank Relationship Framework Agreements

1. Oversight of State ownership in Irish banks

2. Advisory and policy development

3. Oversight of NAMA and HBFI

6. Liquidation of IBRC

4. Oversight of Credit Union Sector

5. Market Interaction

Utilisation of expertise within the Division to provide financial advisory services and input to policy options across the Department of Finance

Manage and co-ordinate the Blockchain & Virtual Currencies working group Provide insight and objective analysis on emerging areas of financial services and technology

Responsible for representing the Minister’s interests in relation to the liquidation of IBRC

The Shareholding and Financial Advisory Division (SFAD) consists of a team of c. 20 professionals with a mix of capital markets, accounting, corporate finance, legal and investment backgrounds. This team has a blend of both private sector expertise and experienced civil servants and has a number of roles and responsibilities:

Responsible for the management of the Minister’s shareholding in the National Asset Management Agency (NAMA) and Home Building Finance Ireland (HBFI)

Represent the Minister’s interests in relation to the oversight of NAMA

Policy oversight for the Credit Union sector Provide advice to the Minister on developments in the sector

Daily two-way interaction with analysts, investors, investor relation teams and investment banks

IntroductionEconomic Update

State Bank InvestmentsNAMA / HBFICredit Unions

IBRCFinancial Advisory

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A Track Record of Delivery

A number of significant milestones have been achieved:

2015

2016

2017

• Recapitalisation, restructuring and deleveraging was undertaken across the sector

• Elimination of promissory notes programme, ELA and liquidation of IBRC

• Sale of Bank of Ireland CoCos (€1bn) and Preference Shares (€2bn)

• State disposal of Irish Life for €1.3bn

• Establishment of NAMA

• Troika programme commitments met and programme exited

• PTSB raised €525m of capital to address stress test shortfall, while the State retained a 75% stake

• AIB capital reorganisation returned €1.6bn to the State

• AIB CoCo redemption of €1.6bn

• IBRC paid first interim dividend of 25% to all admitted creditors

• AIB resumed dividend repayment: €250m

• AIB Initial Public Offering (IPO) raised €3.4bn for the State (the second largest IPO globally in 2017)

• Completion of ReBo activity: 82 mergers concluded, involving 156 individual credit unions with total assets in excess of €6.7bn

• NAMA repaid 100% of its senior debt

• IBRC paid second interim dividend of 25% to all admitted unsecured creditors

2010 to

2014

2018

• BOI announced the re-commencement of dividends

• Eligible Liability Guarantee (ELG) eliminated

• PTSB completed the sale of Project Glas and Project Glenbeigh. This saw its NPL ratio reduce to 10%, from 26% at the start of the year

• Launched an intra-Departmental working group on virtual currencies & blockchain technology

• IBRC paid final dividend of 50% to all admitted creditors

• Anglo Irish Bank assessor appointed pursuant to the Anglo Irish Bank Corporation Act 2009

2019

• Home Building Finance Ireland (HBFI) officially launched in January 2019 to finance housing construction

• Hosted the first Government services blockchain hackathon in the Trinity Innovation Centre in January 2019

• Permanent TSB exited its restructuring plan









Section 6: IBRC


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Economic Growth: Irish economy continues to strengthen and grow

Commentary 2020 Forecast Economic Growth (%)2

1. Central Statistics Office (CSO)2. IMF World Economic Outlook Database, April 2019 (Constant Prices)

3. Personal Consumption Expenditure (PCE) is the market value of all goods and services, including durable products, purchased by households (excluding purchases on dwellings)

4. Source: CSO Retail Sales Index Value Adjusted – (Base 2015=100)

GDP and GNP (€bn)1

Retail Sales Index: Seasonally Adjusted4

(2015 base = 100)

The Irish economy is now larger than it was pre-crisis, and is expected to be one of the fastest growing countries in the Euro Area in 2019 and 2020

Consumer spending growth has experienced steady growth since 2012.

Personal consumption expenditure (Constant prices, Seasonally Adjusted ) €m 3,4

108.4

108.1

95

97

99

101

103

105

107

109

111

113

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Jan

-18

Ap

r-1

8

Jul-

18

Oct

-18

Jan

-19

All retail businesses All retail businesses, excluding motor trades

€188

€312

€159

€246

€0

€25

€50

€75

€100

€125

€150

€175

€200

€225

€250

€275

€300

€325

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

GDP €bn (Seasonally Adjusted) GNP €bn (Seasonally Adjusted)

10%

2%

-11%

-1% -1%1% 1%

3% 4%5%

3%4%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

€0

€20

€40

€60

€80

€100

€120

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Value (€bn) % Change




3.4%

1.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Mal

ta

Slo

vak

Rep

ub

lic

Irel

and

Cyp

rus

Esto

nia

Slo

ven

ia

Luxe

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Lith

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Gre

ece

Spai

n

Swed

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Den

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Fin

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Net

her

lan

ds

Po

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Euro

are

a

Be

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m

Ger

man

y

Fran

ce

Ital

y

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Labour Force: Sharp fall in unemployment helping to drive wage growth

Commentary Unemployment Rate1

Youth employment amongst under 25s as a % of Active Population (2008 – 3Q 2018)3

1. Eurostat2. CSO. Preliminary figures for 2018

3. Eurostat, seasonally adjusted, not calendar adjusted

Wage Inflation: Average Weekly Earnings2

Unemployment rate amongst under 25s as a % of Active Population (3Q 2018)3

Seasonally adjusted unemployment rate stood at 16% in 2012. It has since fallen to 5.4% as of March 2019

Falling unemployment has helped drive wage growth of c.10% between 2013 and 2018

Youth unemployment in Ireland has declined each year since 2012. It now stands at 13.8%, below the EU19 average of 16.8%

€694

€702

€711 €718

€732

€762

€660

€680

€700

€720

€740

€760

€780

2013 2014 2015 2016 2017 2018

+10%

37

.5%

34

.3%

31

.8%

20

.5%

20

.3%

18

.8%

17

.3%

16

.8%

15

.7%

15

.4%

14

.7%

13

.8%

10

.6%

10

.1%

10

.0%

9.2

%

9.0

%

7.5

%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Gre

ece

Spai

n

Ital

y

Fran

ce

Po

rtu

gal

Cyp

rus

Fin

lan

d

EU 1

9

Be

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m

Esto

nia

Slo

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a

Irel

and

Lith

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ia

Latv

ia

Slo

ven

ia

Den

mar

k

Au

stri

a

Net

her

lan

ds

Hu

nd

red

sSep-1813.8%

Sep-1816.8%

0%

5%

10%

15%

20%

25%

30%

35%

20

08

-Q1

20

08

-Q3

20

09

-Q1

20

09

-Q3

20

10

-Q1

20

10

-Q3

20

11

-Q1

20

11

-Q3

20

12

-Q1

20

12

-Q3

20

13

-Q1

20

13

-Q3

20

14

-Q1

20

14

-Q3

20

15

-Q1

20

15

-Q3

20

16

-Q1

20

16

-Q3

20

17

-Q1

20

17

-Q3

20

18

-Q1

20

18

-Q3

Ireland EU 19




Mar-195.4%

Dec-187.9%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

Jan

-16

Jul-

16

Jan

-17

Jul-

17

Jan

-18

Jul-

18

Jan

-19

Hu

nd

red

s

Ireland Euro Area 19

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State Finances: Levels of public debt remain high, though state borrowing

costs amongst the lowest in EuropeCommentary Government Debt to GDP % (2006 – Q3 2018)2

Government Budget Deficit Q3 2018 (%)3

1. Central Bank of Ireland 2. Europa.eu

3. Europa.eu: Government deficit(-) or surplus(+) (as % of GDP)4. Bloomberg: As of 20th March 2019

5. https://www.irishtimes.com/business/economy/government-records-first-budget-surplus-since-crash-1.3746842

Government Net Financial Wealth (Q2 2018)1

European 10 Year Bond Yields (March 2019)4

Levels of state borrowing remain high relative to pre-2007 levels, however, the sustainability and affordability of this is reinforced by strong economic growth and low borrowing costs

Government Debt to GDP significantly impacted by 2015 GDP revisions, however clear progress remains. Government committed to a target of 45% by mid 2020s

Government budget deficit fell throughout 2018. In January 2019, Government reported the first budget surplus since 2006.5

(€bn)120%

69%

86%

0%

20%

40%

60%

80%

100%

120%

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

-Q3

Ireland (%) Euro Area 19 (%)

-0.1%

-0.4%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

20

06

-Q1

20

06

-Q3

20

07

-Q1

20

07

-Q3

20

08

-Q1

20

08

-Q3

20

09

-Q1

20

09

-Q3

20

10

-Q1

20

10

-Q3

20

11

-Q1

20

11

-Q3

20

12

-Q1

20

12

-Q3

20

13

-Q1

20

13

-Q3

20

14

-Q1

20

14

-Q3

20

15

-Q1

20

15

-Q3

20

16

-Q1

20

16

-Q3

20

17

-Q1

20

17

-Q3

20

18

-Q1

20

18

-Q3

Ireland (%) Euro Area 19 (%)

3.7%

2.5%

1.3%1.2% 1.2%

0.7%0.5% 0.5%

0.3%0.2% 0.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Gre

ece

Ital

y

Po

rtu

gal

UK

Spai

n

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and

Be

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m

Fran

ce

Fin

lan

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Net

her

lan

ds

Ger

man

y




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Debt Servicing (1/2): stabilisation leading to better credit ratings and

falling yields – Irish government continues to secure cheap long term

funding

[xx]

Source:1. Moody, S&P, Fitch

2. NTMA: https://www.ntma.ie/business-areas/funding-and-debt-management/investor-relations/credit-ratings

3. Bloomberg

Rating Agency Long-term Short-termOutlook

/trend

Date of

updateLong-term Short-term

Outlook

/trend

BBB+ A-2 Negative WatchDec

2011A+ A-1

Stable Outlook

BBB+ F2 Negative WatchApr

2011A+ F1+

StableOutlook

MOODY’S Ba1 Not Prime NegativeJul

2011A2 P-1

Stable Outlook

N/a A (high) R-1 (middle) Stable Trend

R&I N/a A a-1Positive Outlook

20111

20182

Improved fundamentals helping reduce Irish Government Bond Yield (Weighted Avg. 10 year yield % Jan 2011 – Mar 2019)3:

18/07/201113.5%

13/03/20190.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Jan

-11

Mar

-11

May

-11

Jul-

11

Sep

-11

No

v-1

1

Jan

-12

Mar

-12

May

-12

Jul-

12

Sep

-12

No

v-1

2

Jan

-13

Mar

-13

May

-13

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Mar

-16

May

-16

Jul-

16

Sep

-16

No

v-1

6

Jan

-17

Mar

-17

May

-17

Jul-

17

Sep

-17

No

v-1

7

Jan

-18

Mar

-18

May

-18

Jul-

18

Sep

-18

No

v-1

8

Jan

-19

Mar

-19




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Debt Servicing (2/2): Long term sustainability of debt profile helped by Ireland’s proportionally

young population

Commentary Old Age Dependency Ratio (Individuals aged 64+ as a % of those between the ages of 15-64)1

Fertility Rate In Ireland (2016)2

1. Worldbank.org. 2. Fertility rates relate to the number of children born per family per year

3. Central Statistics Office. 2018 figures are provisional

Favourable demographics reinforce Ireland’s debt sustainability over the longer term, while also continuing to make Ireland an attractive destination for Multinational Corporations (MNCs)

Net migration turned positive in 2016 for the first time since 2009. Continued to grow in 2018 with net immigration of 34,000 versus 20,000 in 2017

Net Inward Migration (Thousands)3

72

105

64

2

-28 -27 -34 -33-21

-123

2034

-150

-100

-50

0

50

100

150

200

-150

-100

-50

0

50

100

150

200

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Immigrants Emigrants Net migration ('000)

1.6

1.7

1.9

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Po

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gal

Po

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d

Spai

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Gre

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Euro

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Cze

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No

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Un

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Kin

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Swed

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and

Fran

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22

26

32

0

5

10

15

20

25

30

35

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93,419

19,271

4,569

18,072

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

ESB Connections CSO New Dwelling Completions

Housing (1/2): 2008 Financial crisis saw a collapse in the Irish housing market – steady

recovery since 2011

Commentary Market-based Purchases of Residential Dwellings2

1. Housing.gov.ie: ESB Connections 1990-2017 & Central Statistics Office (New Dwelling Completions) 2011-2018 – Traditionally the ESB Networks (ESBN) domestic connections dataset was used as a proxy indicator for the number of new dwellings built. However, it is now accepted that this dataset overestimated the situation as it included

connections which do not relate to new dwellings. In Q1 2018 the CSO introduced “New Dwelling Completions” as a more reliable metric.2. Central Statistics Office (Market-based Household Purchases of Residential Dwellings)

3. Central Statistics Office

Ireland’s housing market has recovered well since the collapse in 2007

Rising level of house completions with metrics showing increases across registrations, commencement notices, planning permissions and ESB connections/New Dwelling Completions

Residential property prices have recovered since the financial crisis in 2013, and remain c.20% below their 2007 peak.

Nationally, residential property prices increased by 7% between December ’17 and December ’18.

Residential Property Price Index (Base Jan ‘05 = 100)3

Introduction of Irish Central Bank Macro prudential rules in 2015 slowed the growth in property sales

Central Bank macro-prudential rules increase the resilience of the banking sector

First time buyers can borrow up to 90% of the value of a home (i.e. 10% minimum deposit). Only 5% of new lending to first time buyers will be allowed above the 90% Loan to Value (LTV) limit

For second and subsequent buyers, banks must restrict lending for primary dwelling purchase above 80% LTV to no more than 20% of their new lending.

Bank must restrict lending for primary dwelling purchase above 3.5 times Loan to Income (LTI) to no more than 20% of that aggregate value

Banks must limit Buy-to-Let loans (BTL) above 70% LTV to 10% of all BTL loans

Estimated Number of Private Home completions (1990 – 2017)1

Increase in completions

(‘13 – ‘18)Avg. number of home completions (1990 -2017) 37,075

July 2007= 134

May 2013= 59

December 2018= 106

0

20

40

60

80

100

120

140

160

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

National National excl. Dublin Dublin

13,113 12,675 18,088

21,634

30,855 34,822 34,309 35,876 35,561

4,820 2,351

2,666

2,944

4,402

4,563 5,465 7,316 8,479

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Existing New




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Housing (2/2):Residential property will continue to be a large contributor to

volume growth in the Irish banking sector over the medium termCommentary

Plan to increase residential construction output to 25,000 homes per year by 2020

Open up land supply & low-cost State lands

Local Infrastructure Housing Activation Fund - €200m

NTMA financing of large-scale “on-site” infrastructure

Deliver 50,000 units of social housing in the period to 2021

Lay foundations for a more vibrant and responsive private rented sector

Government Targets1

Measures

Planning Reforms

Larger housing proposals (+100 homes) to go directly to An Bord Pleanála (ABP)

Prioritisation of ABP appeals (18 weeks)

More Strategic Development Zones (SDZs)

Optimal utilisation of existing housing stock

Rent-a-room tax relief programme that provides home owners with up to €14,000 of tax free rental income

Macro-prudential rules limiting Loan to Value and Loan to Income multiples for home buyers

Home Building Finance Ireland (HBFI) established to increase the supply of finance for viable residential developments

1. Action Plan for Housing & Homelessness: http://rebuildingireland.ie/Rebuilding%20Ireland_Action%20Plan.pdf2. Planning permission statistics: execution of planning permission for houses and apartment units. Source: CSO

Planning Permissions granted for new dwelling units (number)2

The financial crisis resulted in a large decrease in construction activity, and led to a reduction in the number of residential properties available on the market

Improving economic conditions are now driving residential property sales, new borrowing and construction activity

Government has set specific targets and implemented a number of measures to increase the volume of new residential properties on the market.

7,411

13,044

16,375

20,776 22,561

-

5,000

10,000

15,000

20,000

25,000

2014 2015 2016 2017 Q3 2018









Section 6: IBRC


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Irish banking sector overview (1/3):

Ireland compares favorably against European peers

Commentary % Reduction in NPE ratio: Q1 2016 – Q3 20181

Net interest margins Q3 2018 (%)1

Cost/income ratios Q3 2018 (%)1

CET1 fully loaded Q3 2018 (%)1

According to the EBA, Ireland was the fastest country in Europe at reducing its Non-Performing Exposure ratio (NPE) amongst comparable countries between March 2016 and September 2018 (-52.9%)

Ongoing cost management, and rising net interest margins helped Irish banks reduce cost to income ratios to below the European average

Irish banking sector well capitalised relative to European peers.

Sources: 1. EBA Dashboard Q3 2018 (Includes 3 domestic Irish banks plus Ulster Bank, DEPFA & Citibank)

52

%

53

%

54

% 57

%

57

%

58

% 62

%

62

%

63

%

63

%

63

%

64

%

72

%

81

%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

ES GR PT

DK

LU NL

GB IE AT

EU IT BE

FR DE

24

%

17

%

17

%

17

%

16

%

16

%

15

%

14

%

14

%

13

%

13

%

13

%

12

%

11

%

0%

5%

10%

15%

20%

25%

LU DK IE BE

NL

DE

GB

EU FR AT

PT

GR IT ES

2.9

%

2.4

%

2.0

%

1.9

%

1.7

%

1.6

%

1.5

%

1.4

%

1.4

%

1.3

%

1.2

%

0.9

%

0.9

%

0.9

%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

GR ES IE AT

PT

NL IT EU GB BE

FR DE

LU DK

-4.1%

19.4%

21.3%

25.9%

34.2%

36.1%

39.0%

39.3%

40.3%

40.5%

43.2%

51.8%

52.9%

-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

GR

LU

NL

FR

ES

DK

GB

BE

DE

PT

IT

AT

IE




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0

20

40

60

80

100

120

140

160

180

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

Jul-

12

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Usage of ECB Facilities ELA

Irish banking sector (2/3):Repayment of State and EU support measures complete

Commentary ECB/ELA for covered banks (€bn)1 – virtually eliminated by mid-2016

Government guaranteed liabilities (€bn)1

Source:1. Central Bank of Ireland (ELA: Emergency Liquidity Assistance). Figures include covered banks – AIB, BOI, PTSB, EBS and IL&P. ELA eliminated by 2014.

2. NAMA: https://www.nama.ie/financial/nama-bonds/

(€bn) (€bn)

(€bn)

Government guaranteed NAMA bonds (€bn)2

Between 2011 and 2015 the Irish covered banks materially reduced their exposure to ECB funding, and eliminated their ELA exposure

Similarly, Government guaranteed liabilities fell from €375bn in 2008 to zero in 2017

Government guaranteed NAMA bonds fully redeemed as of October 2017 –three years ahead of schedule.

€30.2

€25.4

€22.7

€13.6

€8.1

€2.6

€0.0€0.0

€5.0

€10.0

€15.0

€20.0

€25.0

€30.0

2011 2012 2013 2014 2015 2016 2017

€375bn

Q3

20

17

Q1

20

16

Q4

20

15

Q3

20

15

Q2

20

15

Q1

20

15

Q4

20

14

Q3

20

14

Q2

20

14

Q1

20

14

Q4

20

13

Q3

20

13

Q2

20

13

Q1

20

13

Q4

20

12

Q3

20

12

Q2

20

12

Q1

20

12

Q4

20

11

Q3

20

11

Q2

20

11

Q1

20

11

Q4

20

10

Q3

20

10

Q2

20

10

Q1

20

10

Q4

20

09

Q3

20

09

Q2

20

09

Q1

20

09

Q4

20

08

Q3

20

08

€0bn




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10.7%

9.6%9.0% 9.0% 8.7%

8.4%

7.2% 7.1% 7.0% 7.0%

6.1% 6.0%

3.2%

-0.5%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

AT

NL

ES LU DK IE EU FR BE

GB IT PT

DE

GR

Commentary Return on Equity Q3 2018 (%)

Return on Assets Q3 2018 (%)

Profitability in the Irish banking sector compares favourablywith other European countries

Higher net interest margins and lower cost to income ratios both contributing to relatively strong profitability in 2018

High levels of capital retained by Irish banks leading to a more favourable return on assets profile than for return on equity

RWAs at Irish banks very high relative to European averages. As such, leverage is a useful barometer of the true capital strength of the banks.

Sources:1. EBA Interactive Dashboard Q3 2018

CET1 ratios high at Irish Banks• Ireland: 17% (Q3 2018)• EU 29 Avg: 14% (Q3 2018)

Irish banking sector (3/3):…While the sector returns to sustainable profitability1

1.1%

0.9%

0.7% 0.6%

0.6% 0.6%0.5% 0.5% 0.5% 0.5% 0.5% 0.5%

0.2%

-0.1%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

IE AT ES LU NL

PT

BE

EU DK

GB IT FR DE

GR




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State Exit

State bank investments: strategic focus

Investor appetite and market conditions

Valuation

Irish economy

Global economy

Financial performance

Government policy is not to hold these

investments long term and, subject to

market conditions, is willing to exit in a

manner that generates value for the

taxpayer

How we look at the State’s bank investments:

Value For Taxpayers Strong Progress to Date Rational Investor

State priority is to engage with the

market in a sensible, orderly and

professional manner

The monetisation of all the State’s BOI

debt investments, the sale of Irish Life

and the re-IPO of PTSB and AIB

highlights the progress the State has

made. The State is not under pressure

to exit the remaining investments

1 2 3

Multiple considerations to take into account:

Programme for Partnership Government authorisation




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State bank investments Overview

PTSB recently fully exited its2015 EU Restructuring Planand eliminated its last use ofSystem Funding.

Key financial metrics includeda marginal drop in NIM(1.78% in FY18 vs 1.80% inFY17). Profit beforeexceptional items and taxincreased 45% to €94m. Fullyear results for 2018 showedstrong lending growth of over40% compared to FY17.Mortgage market shareincreased to 15.1% up from12.6% in FY17.

FY18 saw a 68% reduction inNPLs largely due to thesuccessful execution ofProjects Glas and Glenbeigh.NPLs were down to €1.7bn atend FY18 (from €5.3bn inFY17). The bank’s NPL ratiowas 10% at the end of FY18.

AIB issued its full year 2018 results inMarch 2019. The bank continues todeliver sustainable underlyingprofitability while maintaining arobust capital position and proposedpaying a dividend of €461m for thefull year 2018.

The bank appointed a new CEO (ColinHunt) and CFO (Donal Galvin).

Key financial metrics included a profitbefore tax of €1.25bn. New lendingwas up 15% on 2017 with newmortgage lending being up 16%.

AIB continues to demonstratesignificant capital generationcapabilities. The bank’s fully-loadedCET1 ratio at the end of FY18 was17.5%, substantially in excess of theirregulatory capital requirements.

Impaired loans continue to decline atpace with a 41% reduction in FY18down to €6.1bn (a reduction ofalmost €25bn since the peak in2013).

The bank announced anunderlying profit before taxof €935m for FY18. Newlending grew by 13% inFY18, rising to €15.9bn.New Irish mortgages grewby 17% with a stablemarket share of 27%.

The bank announced aproposed divided of €173mfor FY18.

BOI had a fully loaded CET1ratio of 13.4% at end FY18.

FY18 saw a 24% reductionin NPEs down to €5.0bn.The bank’s NPE ratio was6.3% at end FY18.

Commentary

The state has reduced its ownership in all three banks since 2013

Strong capital generation to support growth and payouts while helping to withstand regulatory headwinds

Steady growth in new lending, with PTSB growing its front book market share in mortgages from 12.6% to 15.1% in FY18.

99.9% 99.9%

2013

29% 86% 25%

71%

14%

75%

March 2019

% State

Owned

% Privately

Owned

The State holds investments in three Irish banks:

Recent Highlights

85%

15%

1. On a constant currency basis




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State bank investments: Paving the road to growth

Net Interest Margin Impairment (Charge) / Credit (EURbn) Underlying Profit Before Tax (EURbn)

Increased Profitability2,3Improved Risk ProfileEnhanced Revenue Drivers1

1. Net interest margins exclusive of ELG2. PTSB reported losses, after exceptional items, of €226m in 2016 and €434m in 2015. Exceptional

items substantially comprised losses on the deleveraging of non-core loan portfolios. 3. Profit Before Tax and exceptional items

1.5% 1.4%1.2%

1.4%

1.7%2.0%

2.2%

2.6% 2.5%

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

1.5%1.3% 1.3%

1.8%

2.1% 2.2% 2.2% 2.3% 2.2%

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

(1.0)

(0.2)

(2.2)

(0.5)

0.91.2 1.1 1.1 0.9

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

0.9% 0.9%0.7%

0.8% 0.9%

1.1%

1.5%

1.8% 1.8%

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

(0.4)(0.5)

(0.9)(0.7)

0.0 0.00.2

0.1 0.1

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

(12.1)

(5.1)(3.7)

(1.7)

1.32.2 1.5 1.6 1.4

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

(6.0)

(7.9)

(2.4)(1.9)

0.2 0.9 0.3 0.1 0.2

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

(1.9) (1.9)(1.7) (1.7)

(0.5)(0.3) (0.2)

(0.0)

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

(0.4)

(1.4)

(0.9) (0.9)

0.0

(0.0)

0.1

(0.0) (0.0)

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18




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State Bank InvestmentsTransformational change in underlying financial metrics

of State bank investments between 2010 and 2018Commentary State bank investments: change in selected metrics (2010 to 2018)

Transformational change across all three State bank investments between 2010 and 2018

Recovery in all covered metrics including: profitability, capital reserves, new lending volumes, Loan to Deposit Ratios, and non-performing loans

EU restructuring plans fully exited by all three banks

AIB BOI PTSB

Metric €bn/% Year 2018 €bn/% Year 2018 €bn/% Year 2018

Loan to Deposit Ratio

165% 2010 90% 175% 2010 97% 227% 2011 93%

Central Bank Funding

€31bn 2011 Nil €33bn 2010 €2.7bn €19.5bn 2011 Nil

Total new lending1 €7bn 2013 €12.1bn €6.6bn 2013 €15.9bn €0.1bn 2012 >€1.5bn

Underlying profit/loss

Loss -€10.4

2010Profit

€1.4bnLoss

€3.5bn2010

Profit €935m

Loss €1bn

2012Profit €94m

NIM 1.03% 2011 2.47% 1.25% 2012 2.20% 0.72% 2013 1.78%

NPL / NPL Ratio2

€29bn/35%

2013€6.1bn/

9.6%€18bn/

18%2013(June)

€5bn/6.3%

€8.6bn/28%

2013€1.7bn/

10%

Core Equity Tier 1 Capital3 4.0% 2010 17.5% 6.30% 2013 13.4% 11.30% 2013 12.2%

EU Restructuring Plan

Entered 2011 Exited Entered 2010 Exited Entered 2015 Exited

1. Total new lending - BOI & AIB did not disclose pre-20132. 2018 values reflect the Non-Performing Exposure (NPE) balance for AIB and BOI, and the NPL Balance for PTSB

3. CET1 Fully loaded used for 2018 values. BOI 2013 excludes the preference shares. PTSB’s pro-forma CET1 increases to 14% when the capital benefit from Projects Glas and Glenbeigh is included




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€2.8€4.2 €5.0 €5.4 €5.7 €6.0 €6.0 €6.3 €6.6€0.5

€0.5

€5.0 €5.0

€7.4

€9.2

€12.6 €12.6 €12.6

€7.7

€8.0

€11.6

€13.3

€13.9€11.6

€10.6 €7.1 €7.3

€14.3

€17.7

€23.1

€25.5

€29.9

€28.8

€31.1

€27.2€27.7

€0.0

€5.0

€10.0

€15.0

€20.0

€25.0

€30.0

€35.0

€0.0

€5.0

€10.0

€15.0

€20.0

€25.0

€30.0

€35.0

2009-2011 2012 2013 2014 2015 2016 2017 2018 March-19

Fees and Income (accumulated) Disposals (accumulated) AIB Valuation BOI Valuation PTSB Valuation

State bank investments:Expected value attributable to taxpayers

Value of State’s Shareholding (Mar-2019)

€7.3bn

€0.8bn

€0.4bn

Total €8.5bn

€29.4bn investment expected to be recovered (€bn)1,2,3,4:

€29.4bn State Investment

(€bn)

1. Disposals comprise sale/redemption of debt instruments, AIB and PTSB IPOs, and the sale of Irish Life. 2. Fees and income comprise interest coupons, recap fees, and CIFS/ELG fees.

3. Bank valuations based on ISE closing prices, March 2019.4. The result of AIB IPO reflected above does not include value of Government owned warrants.

Cash Realised (€19.2bn)

Market value of State holdings

(€8.5bn Un-realised)

€27.7bn market value of State investments + realised cash(as at March 2019)




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€6.1 €6.4

€10€11.7 €12.3 €11.3 €10.6

€7.1 €7.3

€1.2€1.7

€2.0

€2.3

€4.6 €6.4€10.1

€10.3 €10.6

State Aid Injection €20.75bn

€7.3€8.1

€12.1

€13.9

€16.8€17.7

€20.7

€17.4€17.9

€0.0

€5.0

€10.0

€15.0

€20.0

2011 2012 2013 2014 2015 2016 2017 2018 Mar-19

Valuation Cumulative Repayments State Aid Injected

€0.2€0.6

€1.2€1.7

€2.0 €2.3

€4.6

€6.4

€10.1 €10.3 €10.6

€0.0

€2.0

€4.0

€6.0

€8.0

€10.0

€12.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Mar-19

ELG Fees Interest Payments Capital Redemptions

Dividends Cumulative Repayments

Long Only Funds 66%

Hedge Funds23%

Sovereign Wealth Funds

12%

State bank investments

€3.4bn1 IPO of AIB

1. No valuation ascribed to state warrants2. Bloomberg

3. Valuation as of March 2019

Pricing Date 22-Jun-17

ListingOfficial List of the Irish Stock Exchange (Primary Listing) and London Stock Exchange Main Market (Premium Listing)

Offer Price €4.40

Offer Size €3,433.7m (incl. greenshoe)

Residual Shareholding

c.71.25%

Retail Offer 10% of base offering

Implied Market Cap €11,943m

Lock-Up 180 days for Minister and AIB

• Largest listing in EMEA and second largest worldwide in 2017. Largest IPO in the UK since Glencore in 20112

• Second largest European Bank IPO since 20072

• More than 250 investors in the allocated order book

• Top 50 allocations accounted for c.75% of the order book

• Quality of allocation: more than 30% of the order book received zero allocation

Allocationby geography:

Allocationby fund type:

UK35%

US25%France

8%

Ireland2%

RoW31%

(€bn) (€bn)

AIB State Aid Repayments (€bn)AIB Valuation & Redemption (€bn)3

Key Offering Statistics Transaction Highlights




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0.6x 0.7x 0.6x 0.3x0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

EuroStoxx Bank Index AIB Bank of Ireland Permanent TSB

State Bank Investments Banks trading at a discount to book value

Commentary % Change in Listed Share Prices1

Price to Book Ratios (25th March 2019)2

In line with the wider European banking sector, share prices for all three State bank investments have declined since January 2018

European banks trading at a discount to book value with the EuroStoxxBank Index trading at 0.6 times book value as of March 2019

1. Source: Bloomberg March 20th March 20192. Bloomberg 25th March 2019. The EuroStoxx Bank Index tracks the share price performance of the European banking sector

EuroStoxx Bank Index

0%

-25%

-43%

-21%

-25%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19

AIB PTSB BOI EuroStoxx Bank Index

Irish State Bank Investments




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Enhanced profitability drivers (1/4) Margin recovery

Commentary Net Interest Margin trajectory (%)2

Falling Cost of Funds (Excluding ELG%)2,3

Margin recovery led by declines in deposit interest rates, wholesale funding costs and increasing weighting of front book pricing on asset side

Front book pricing remains high relative to European averages. This is partially driven by the high default rates experienced by State bank investments during the financial crisis

On a constant currency basis, asset bases starting to stabilise after years of mandated and voluntary deleveraging

The improvements come despite significant mortgage tracker portfolios weighing on asset margins, and the low interest rate environment

New household fixed term deposit interest rates have decreased from c.2.4% in 1Q 2012 to c.0.6% in 1Q 2019.1

1. Central Bank of Ireland: Retail Interest rates on new business and agreed term of 2 years or more 2. Published financial statements

3. ELG: provides for a State guarantee for certain eligible liabilities (including deposits) of up to 5 years in maturity by participating institutions from the date they joined the scheme until the closure of the scheme. Guarantee linked liabilities ceased in March 2018

1.6%

1.3%

1.0%

0.6%0.5%

1.1%

0.9%

0.6%

0.4% 0.4%

1.6%

1.1%

0.7%

0.5%0.4%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2014 2015 2016 2017 2018

AIB BOI PTSB

1.2%1.4%

1.7%

2.0%

2.2%

2.6%2.5%

1.3%

1.8%

2.1%2.2% 2.2%

2.3%2.2%

0.7%0.8%

0.9%

1.1%

1.5%

1.8% 1.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2012 2013 2014 2015 2016 2017 2018

AIB BOI PTSB




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Commentary Gross Credit Extended to SMEs by Sector 2011 – Q4 2018 (€bn)1

Mortgage Drawdowns by Mortgage Type 2011–2018 (€bn)2

Upward trajectory in gross new lending to SMEs since 1H 2013

The value of annual mortgage drawdowns has increased by nearly 3.5 times between 2013 and 2018.

Source:1. Central Bank of Ireland: Trends In Business Credit and Deposits 3Q 2018. Excludes financial institutions. SMEs are defined as

enterprises with fewer than 250 employees and whose annual turnover does not exceed €50 million2. Banking and Payments Federation of Ireland: only data relating to BPFI members included in dataset

Enhanced profitability drivers (2/4)Gross new lending healthy & growing

€1.1 €1.4 €1.2€1.9 €2.3 €2.6

€3.6€4.2

€0.9€1.0 €1.1

€1.7€2.0

€2.2

€2.7

€2.8

€0.2

€1.2

€0.2

€2.5 €2.6 €2.5

€3.9

€4.9

€5.7

€7.3

€8.7

€0.0

€1.0

€2.0

€3.0

€4.0

€5.0

€6.0

€7.0

€8.0

€9.0

€10.0

€0.0

€1.0

€2.0

€3.0

€4.0

€5.0

€6.0

€7.0

€8.0

€9.0

€10.0

2011 2012 2013 2014 2015 2016 2017 2018

First Time Buyer Mover Purchase Residential Investment Re-mortgage Top-up Total




€3.1

€2.6€2.2

€2.7

€3.5

€4.6€4.9

€5.3

€0.0

€1.0

€2.0

€3.0

€4.0

€5.0

€6.0

€0.0

€1.0

€2.0

€3.0

€4.0

€5.0

€6.0

2011 2012 2013 2014 2015 2016 2017 2018

Wholesale/Retail Trade & Repairs Real Estate Activities Primary Industries Other

Hotels and Restaurants Manufacturing Business and Administrative Services

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96

%

12

3%

76

%

55

%

48

%

52

%

49

%

53

%

78

% 88

%

60

%

54

%

53

%

57

% 62

%

65

%

11

1%

14

5%

11

9%

12

6%

74

%

65

%

64

%

64

%

0%

20%

40%

60%

80%

100%

120%

140%

160%

2011 2012 2013 2014 2015 2016 2017 2018

AIB BOI PTSB

Enhanced profitability drivers (3/4)Cost to income ratios falling and below European averages

Commentary

Continued focus on both income enhancement and cost reduction is driving improved sustainability

Increased levels of investment in IT infrastructure and digital platforms across all three banks

Reduction in costs partially driven by a fall in headcount

Aggregate Cost to Income ratio of Irish banks stood at 62% in Q3 2018. Compares with 63% at a European level.

State Bank Investments Cost to Income Ratios (2011 – 2018)1

BOI in process of delivering €1.4bn investment programme. Average of €275m investment p.a. between 2016 and 2021

AIB completed a 3 year €870m strategic investment programme in Dec-17

1. Report metrics from published financial accounts. Excludes bank levies, regulatory fees and exceptional items2. EBA Dashboard Q3 2018 (Includes 3 domestic Irish banks plus Ulster Bank, DEPFA & Citibank)

3. Staff numbers based on average for the period (shown on a year end basis for AIB 2008). Decline attributable to a combination of voluntary redundancies, headcount reductions and business disposals

Global Staff Numbers 2008 – 20183 Average CTI Ratio by Country Q3 2018 (%)2:

52% 53% 54%57% 57% 58%

62% 62% 63% 63% 63% 64%

72%

81%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

ES GR PT

DK

LU NL

GB IE AT

EU IT BE

FR DE

25,919

16,026

5,053

9,801 10,595

2,418

-

5,000

10,000

15,000

20,000

25,000

30,000

AIB BOI PTSB

2008 2018




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34

28 2724

23 22 22 22 21

0

5

10

15

20

25

30

35

40

2009 2010 2011 2012 2013 2014 2015 2016 2017

Ireland

Enhanced profitability drivers (4/4)Reduced branch footprint driving down costs at Irish banks

Commentary

1. World Bank Data. Commercial bank branches are retail locations of resident commercial banks and other resident banks that function as commercial banks that provide financial services to customers

and are physically separated from the main office but not organized as legally separated subsidiaries.2. 8th out of 17 countries. Source: Indecon Report on Benchmarking of Ireland’s Payments Industry, 2019

Irish commercial bank branches per 100,000 adults1

c.40% reduction in the number of bank branches (per 100,000 adults) in Ireland between 2009 and 2017 following large branch closure programmes and departure of foreign and domestic players (e.g. Danske Bank, HBOS, Irish Nationwide)

The number of bank branches in Ireland per 100,000 adults now amongst the lowest in Europe

Ireland has experienced a shift towards card based payments with the number of credit and debit card transactions increasing from roughly 50 transactions per person per annum in 2012 to nearly 80 in 2017. Ireland now ranks 8th in Europe for card usage as a means of payment3

EU Commercial bank branches per 100,000 adults (2017)1

c.40% reduction

71

59

51 50

45

36

30 29

23 22 21 21 2116 16

13 12 106

0

10

20

30

40

50

60

70

80




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Drivers of Falling

NPEs

State bank investments: improved risk profile (1/2)Combined NPE ratio for AIB, BOI and PTSB fell to 8% as of

December 2018

Commentary AIB Non-Performing Exposures (NPEs)

Significant reduction in Non-Performing Exposures across all three State Bank Investments. 80% reduction in AIB and PTSB between 2013 and 2018. While Bank of Ireland reduced NPEs by 47% between 2016 and 2018

A combination of rising property prices, a growing economy, and measures taken by Irish banks to address non-performing loans have all contributed to the decline in balances.

Improved Collateral

Improved borrower

repayment capabilities

Portfolio Sales

Loan Treatment

1. Company Accounts / Central Bank of Ireland / DoF Analysis.

NPE = NPL + eligible forborne loans + other exposures

NPL = Impaired + debtors deemed unlikely to pay

Permanent TSB - Non-Performing Loans (NPLs)

Bank of Ireland Non-Performing Exposures (NPEs)

Combined 3 Banks Non-Performing Exposures

€30.7

€26.2

€18.0

€14.1

€10.2

€6.1

37%35%

26%

22%

16%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

€0.0

€5.0

€10.0

€15.0

€20.0

€25.0

€30.0

€35.0

2013 2014 2015 2016 2017 2018

AIB (NPEs) NPE Ratio %

€8.6€8.3

€6.6

€5.8€5.3

€1.7

26% 26% 26%27%

26%

10%

0%

5%

10%

15%

20%

25%

30%

€0.0

€1.0

€2.0

€3.0

€4.0

€5.0

€6.0

€7.0

€8.0

€9.0

€10.0

2013 2014 2015 2016 2017 2018

PTSB (NPL) NPL Ratio

€9.4

€6.5

€5.0

11%

8%

6%

0%

2%

4%

6%

8%

10%

12%

€0.0

€1.0

€2.0

€3.0

€4.0

€5.0

€6.0

€7.0

€8.0

€9.0

€10.0

2016 2017 2018

BOI (NPEs) NPE Ratio %

-80%

-80%

-47%

€14.1

€10.2

€6.1

€9.4

€6.5

€5.0

€5.8

€5.3

€1.7

€29.3

€22.0

€12.8

17%

14%

8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

€0.0

€5.0

€10.0

€15.0

€20.0

€25.0

€30.0

€35.0

2016 2017 2018

AIB (NPEs) BOI (NPEs)PTSB (NPL) Total

(€bn)

(€bn) (€bn)

(€bn)

-56%




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Commentary NPE Ratio % By Country (EBA Data: March 2016 to September 2018)

% Reduction in NPE Ratio (March 2016 to September 2018)

Relative to other EU countries, Ireland’s banks have relatively high, but falling Non-Performing Exposures (NPEs)1

The Irish banking system has reduced its NPE ratio faster than all other comparable European countries. According to the EBA, it fell by 52.9% between March 2016 and September 2018.

State bank investments: improved risk profile (2/2)NPE reduction ahead of European peers

1. NPE = Impaired loans + debtors deemed unlikely to pay + eligible forborne loans + other2. EBA Dashboard Sept-18

37

.7%

16

.3%

13

.6%

12

.0%

5.3

%

5.4

%

3.5

%

3.2

%

2.4

%

2.8

%

2.4

%

2.0

%

0.9

%

39

.2%

9.7

%

7.7

%

5.6

%

3.5

%

2.6

%

2.6

%

2.1

%

1.9

%

1.7

%

1.4

%

1.2

%

0.7

%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

GR PT IT IE ES AT FR DK NL BE DE GB LU

Mar-16 Sep-18

-4.1%

19.4%

21.3%

25.9%

34.2%

36.1%

39.0%

39.3%

40.3%

40.5%

43.2%

51.8%

52.9%

-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

GR

LU

NL

FR

ES

DK

GB

BE

DE

PT

IT

AT

IE




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11

6% 1

28

%

13

2%

12

8%

10

8%

11

3%

13

6%

13

6%

15

3% 1

66

%

16

5%

16

0%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

2015 2016 2017 2018

AIB BOI PTSB

State bank investments: capital, liquidity & funding (1/2)

Stable, high quality funding profile

Commentary Falling Loan to Deposit Ratios % (2012 to 2018)1

Net Stable Funding Ratio % (2015 to 2018)1,3

Household deleveraging (€bn)2

Reduced loan to deposit ratios (LTDs) across all three State bank investments as households and businesses deleverage. Provides capacity for additional lending

A combination of falling household liabilities and increasing asset values has led to aggregate nominal household net worth exceeding pre-crisis levels

Quality of funding remains high, exceeding the Basel III net stable funding ratio minimum requirements

Similarly, liquidity levels exceed January 2019 Basel III requirements.

1. Published financial accounts & Pillar III disclosures2. Central Bank of Ireland: Quarterly Financial Accounts

3. Net Stable Funding Ratio (NSFR) seeks to calculate the proportion of long-term assets which are funded by long-term, stable funding. The NSFR limits overreliance on short-term wholesale funding. Soruce: Annual accounts & Pillar 3 Disclosures

4. The LCR is calculated by dividing a bank's stock of high-quality liquid assets by its total net cash outflows over a 30-day stress period

Household Deposits

Liquidity Coverage Ratio % (2015 to 2018)1,4

Jan ’19 Min-

Requirement

(100%)

11

5%

10

0%

99

%

10

0%

95

%

93

%

90

%

12

3%

11

4%

11

0%

10

6%

10

4%

10

0%

97

%

19

1%

15

1%

13

8%

12

5%

11

1%

10

8%

93

%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2012 2013 2014 2015 2016 2017 2018

AIB BOI PTSB

11

1% 1

19

%

12

3%

12

5%

12

0%

12

2%

12

7%

13

0%

92

% 10

5% 11

4% 12

1%

0%

20%

40%

60%

80%

100%

120%

140%

2015 2016 2017 2018AIB BOI PTSB

Min- Requirement

(100%)




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State bank investments: capital, liquidity & funding (2/2) Strong capital base

Commentary Core Equity Tier 1 Capital ratios % (FY 2018)1,2

Core Equity Tier 1 Capital Ratios by Country (Fully Loaded: Q3 2018)2,3

Total Regulatory Capital ratios % (FY 2018)1,2

Leverage Ratios by Country (Fully Loaded: Q3 2018)2,3

State bank investments now well capitalised relative to EU peers on a fully loaded basis

BOI, AIB and PTSB have all returned to profitability and are capital accretive

RWAs partly responsible for the relatively high levels of capitalisation at Irish banks. According to the EBA Transparency data (Dec-2018), risk weighted assets for Irish residential mortgages (based on IRB models) were 38%. This is 2.5x the European median of 15%, and the third highest in Europe behind Hungary and Romania.4

1. Published annual reports2. “Transitional” refers to the transitional Basel III required for CET1 ratios which came into effect Jan-14. “Fully loaded” refers to the actual Basel III basis for CET1 ratios.

3. EBA Dashboard Q3 2018 (Includes 3 domestic Irish banks plus Ulster Bank, DEPFA & Citibank)4. “Risk Weighted Assets in Ireland” Department of Finance: https://assets.gov.ie/6836/664f5174ebd34f7e938aea654bed6757.pdf

Basel III Leverage Ratio Rule:

Tier 1 Capital ≥ 3%

Total Exposure

24%

17% 17%17%

16%16% 15%

14% 14%13%

13% 13%12%

11%

0%

5%

10%

15%

20%

25%

LU DK IE BE

NL

DE

GB

EU FR AT

PT

GR IT ES

9%9%

7% 7%

6%6%

5%5% 5% 5%

5% 5% 5%4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

IE GR PT

LU AT

BE ES GB

EU IT FR DE

DK

NL

21.1%

17.5%

15.0%

13.4%14.7%

12.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

CET1 (Transitional) CET1 (Fully loaded)

AIB BoI PTSB

22.4%

19.1%18.8%

17.2%16.0%

13.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Total capital % (Transitional) Total capital % (Fully loaded)

AIB BoI PTSB




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Ongoing ConsiderationsBrexit: State bank investments’ exposure to UK market1

Commentary

Permanent TSB disposed of its ‘non-core’ UK assets during 2015 and 2016

Irish banks have already included in their stress tests many of the potential impacts Brexit might have on their balance sheets

Overall, the UK remains an important trading partner to the Irish economy. However, Ireland’s reliance on the UK market has reduced over time, falling from over 50% of Irish exports in the early 1970’s to just 17% in 2015.4

1. Figures sourced from published financial statements 2. Retail UK business only. Operating profit includes joint ventures.

3. PTSB sold remaining UK assets in H2 2016. 4. Garcia-Rodriguez, A., McInerney, N., Morgenroth, E., and D. Smith. (2016). “Modelling the

Medium to Long Term Potential Economic Impact of Brexit on Ireland”.

UK Exposure FY2016 FY2017 FY2018% of Group

Total (FY18)

Total income (£m) £489 £515 £546 19%

Loans & Advances - net (£bn) £25.6 £24.8 £24.4 32%

Operating profit (£m)2 £153 £157 £194 23%

Impairment Write Back (Charge) (£m)2 -£82 -£100 -£66 NM

UK Exposure FY2016 FY2017 FY2018% of Group

Total (FY18)

Total income (£m) £237 £267 £269 10%

Loans & Advances - net (£bn) £7.5 £7.3 £7.4 12%

Operating profit (£m) £122 £151 £161 12%

Impairment Write Back (Charge) (£m) £30 -£13 -£18 NM

UK Exposure3 FY2016 FY2017 FY2018% of Group

Total (FY18)

Total income (£m) - - - -

Credit outstanding (£bn) - - - -

Operating profit (£m) - - - -

Impairment write back (Charge) (£m) - - - -









Section 6: IBRC


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NAMA Background and Performance

€0.0

€1.3

€3.5€2.8

€9.1

€5.5 €5.5

€2.6

€30.2 €29.0

€25.4€22.7

€13.6

€8.1

€2.6€0.0

€0

€2

€4

€6

€8

€10

€0

€5

€10

€15

€20

€25

€30

2010 2011 2012 2013 2014 2015 2016 2017

Bonds Redeemed (€bn) Bonds Outstanding (€bn)

Performance: 100% of €30.2bn senior debt redeemed 3 years ahead of schedule

Purpose: Established in 2009 to remove uncertainty around land and development loans from participating banks’ balance sheets, the value of which had fallen steeply following the financial crisis1

Nominal value of loans transferred:

Acquired gross loans with outstanding principal balances of €74.2bn from Irish banks

Price paid for loans acquired:

In total €31.8bn paid (57% discount on par debt) in the form of:1

€30.2bn ECB eligible Government guaranteed senior bonds €1.6bn unguaranteed subordinated bonds.

State Aid: Consideration included an uplift to reflect the long term economic value. Market value of the loans at the reference valuation date (30th Nov 2009) was €26.2bn, difference of €5.2bn notified as State Aid

Progress to date: Through phased disposals, asset/debtor management and complimentary value maximizing strategies, NAMA has now generated in excess of €40.7bn cash and redeemed 100% of its €30.2bn senior debt2

Profitability: Generated profit of €1.5bn in 2016, €481m in 2017, and expects to generate a profit for its 8th consecutive year in 20182

Redemption of debt Redeemed all of its €30.2bn senior debt as of October 2017 and over €500m of its subordinated debt as of April 2018. Expects to redeem the remaining €1.1bn of its subordinated debt in 2020 and generate a surplus of €3.5bn

Background:

(€bn)

1. Participating banks include: AIB, Anglo Irish Bank, Bank of Ireland, Irish Nationwide Building Society and EBS Building Society.Further detail on valuation and discounts applied can be found here - https://www.nama.ie/financial/

2. Surplus can only be returned to State once senior, subordinated debt and equity investors are repaid as per Section 60 of the NAMA Act 2009. Source: 2017 Annual Report




https://www.nama.ie/financial/

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NAMA Has Three Commercial Objectives

NAMA seeks to make a positive social and economic contribution across the broad range of its activities, subject to the primacy of its commercial mandate and often complementing it.

Repay 100% senior debt by year end 2017 and all sub-debt by March 2020

100% of senior debt repaid as of October 2017. Redeemed over €500m of its subordinated debt since April 2018 and on track to redeem the remaining €1.1bn sub-debt by March 2020

Facilitate delivery of key Grade A office space in the Dublin Docklands Strategic Development Zones (SDZ)

All of the sites NAMA originally had an interest in are either completed, under construction, received planning, or had been sold with planning permission

Facilitate delivery of up to 20,000 residential units by end 2020

From 2014 to February 2019, NAMA has directly funded the construction of 9,700 new residential units in Ireland and facilitated an additional 3,400 new units indirectly.

1

2

3

Objective Achievements to date




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2010 - 2013

• Strategic focus on UK disposals during 2010 –2013. UK market had remained comparatively buoyant

• 73% UK sales: London assets accounted for 60% of total NAMA sales proceeds, rest of Britain - 13%

• Irish assets, by contrast, accounted for just 16% of total sales proceeds in the same period

• By end-2012 NAMA had sold less than €1bn in Ireland – a deliberate action

2014

• Improving market conditions, increased institutional investor appetite - NAMA took strategic decision to steadily increase the volume of available supply from 2013 onwards

• Step change seen in total NAMA sales proceeds: €7.8bn in 2014 - increase of €4.1bn on 2013

• Of the €7.8bn, 44% or €3.7bn generated from the sale of Irish properties

2015/2016

• In 2015, two-thirds of disposals were in Ireland - strong domestic and international investor appetite

• Total NAMA sales proceeds: €8.5bn in 2015 - increase of €0.7bn on 2014

• 2016 total NAMA sales proceeds of €5.1bn -64% or €3.3bn generated from the sale of Irish assets

• Cumulative Irish sales at €14.4bn at YE 2016

2017/2018

• Few large portfolio sales remain in pipeline

• End-2017 carrying value of NAMA’s loan portfolio was €3.7bn –down to €2.4bn by end of September 2018

• Majority of portfolio relates to residential delivery and Dublin Docklands SDZ programmes –increased focus from 2017 onwards

• Increased its projected lifetime surplus to €3.5bn

2019+

• Publication of Section 227 Review in 2019 outlining NAMA’s wind-down strategy

• Redemption of €1.1bn remaining sub-debt by March 2020

• Repayment of private investors and delivery of €3.5bn surplus

NAMA’s Phased Disposal Strategies

NAMA: Timeline of Events




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NAMA: Balances Outstanding

The majority of NAMA’s remaining portfolio relates to the residential delivery and Dublin Docklands (SDZ) programmes,with the remainder relating to a large volume of low-value assets, many of which will require meticulous workout if theirvalue is to be optimized

The final phase of NAMA’s deleveraging will be a relatively slow process, with few major sales and the focus to 2020 will beon the Dublin Docklands SDZ and residential delivery programmes.

Geographic mix of remaining assets mainly Dublin centric. Potential Brexit impacts mitigated following disposal of bulk ofUK book

Original Acquisition vs NAMA Carrying Value (€bn)1Remaining Asset Portfolio: Geographic breakdown based on value of underling collateral February 2019

Commentary:

(€bn)

Dublin 73%

Rest of ROI 23%

UK1%

Rest of World 1%

Non-Real Estate Assets (€0.1bn)

2%

€71 €73 €71

€67

€56

€41

€28 €26

€24

€29 €26

€23 €20

€13

€8 €4 €4 €2

€0

€10

€20

€30

€40

€50

€60

€70

€80

2010 2011 2012 2013 2014 2015 2016 2017 Sep-18

Par Value (€bn) Carrying Value (bn)

1. Change in value between Dec-17 and Sept-18 carrying value partly impacted by change in accounting policy from IAS 39 to IFRS 9. Carrying value for Jan-18 increased from €3.0bn (IAS39) to €3.1bn (IFRS9) as a result of the change. Source: NAMA Q1 2018 accounts




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€8.1

€0.0

€0.3

€8.1

€0.2

€0.5

€2.3

€0.1

€1.6

€1.1

€1.6

€3.9

€0.1

€0.1

€0.0

€2.0

€4.0

€6.0

€8.0

€10.0

€12.0

2015 Senior BondRedemption

Decrease inother liabilities

Decrease in Sub -Debt

Increase inRetainedEarnings

Sep-18

Government Guaranteed Senior Bonds Other Liabilities

Subordinated Bonds Retained Earnings

Non-Controlling Interests

NAMA: Funding Structure & Distribution

NAMA Funding Structure 2016 – September 2018 (€bn)1,2:

Source:1. NAMA Q3 Report 2018

2. As the subordinated notes contain no contractual obligation to make payments, it has been classified as equity in the statement of financial position, with any coupon payments classified as dividend payments

Taking into account €1.1bn of subordinatedbonds (due in March 2020) NAMA held justunder €3.9bn of retained earnings attributableto shareholders at end of September 2018.

Final €500m of senior bonds redeemed inOctober 2017 meaning that NAMA has nowfully repaid its senior debt

NAMA’s equity ownerships consists of:

Private investors: 51%

State shareholding: 49%

The return to the private investors is cappedand linked to the Irish Government Bond yieldwith the potential of an additional 10% of thecontributed capital sum (€51m) at dissolution

Surplus is only available for distribution once allsenior and subordinated debt is redeemed infull and private investors are repaid

(€bn)

Commentary

c.€3.9bn of retained earnings

attributable to shareholder

€11.6

€5.1




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Home Building Finance Ireland (‘HBFI’)

Home Building Finance Ireland (“HBFI”) was announced as part of Budget 2018 to increase the availability of debt funding to commercially viable residential development projects in the State.

HBFI has been established to provide senior debt funding on a commercial basis to small and medium size residential development projects (circa €2m to €35m) throughout the Irish State.

The Home Building Finance Ireland Act was commenced on 5 December 2018 and HBFI was formally launched in January 2019. HBFI has an independent board and is wholly owned by the Minister for Finance.

Further information in relation to HBFI and its application process can be found at https://www.hbfi.ie

HBFI Funding

HBFI Indicative Lending Criteria

Overview




https://www.hbfi.ie/






Section 6: IBRC


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Minister For Finance

Credit Union stakeholders

Average New Loan Average Savings

€3,900€3,400

252 registered credit unions in the Republic of Ireland serve the needs of 3.1 million

members 1

The role of Minister for Finance is to ensure that the legal framework for credit

unions is appropriate.

The Registrar of Credit Unions at the Central Bank of Ireland is the independent

regulator for credit unions in Ireland.

The main representative bodies are:

ILCU (creditunion.ie) - 339 credit union's affiliated to League in the Republic

of Ireland and Northern Ireland.

CUDA (cuda.ie) – represents 14 credit unions and also provides affinity

membership for a number of additional credit unions.

CUMA (cuma.ie) – represents credit union managers in Ireland.

NSF (nsf.ie) - supports board oversight committees in the Republic of

Ireland and supervisory committees in Northern Ireland.

CUAC is a statutory body providing advice to the Minister for Finance on credit union

matters.

The Minister for Finance set up an Implementation Group to oversee the delivery of

recommendations that emerged from a CUAC review of a Commission on Credit

Unions report. The Implementation Group published its Final Report in January

2019.

The Credit Union Restructuring Board (ReBo) facilitated and supported credit union

amalgamations. ReBo’s restructuring activities ceased on the 31st of March 2017.

82 mergers concluded, involving 156 individual credit unions with total assets in

excess of €6.7bn.

Members Credit Unions

Registrar of Credit Unions

CUACCREDIT UNION ADVISORY

COMMITTEE

ILCUIrish League of Credit Unions

Key Stakeholders Sector Overview1

Source: 1. As of September 2018




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Credit Unions: background

Number of Credit Unions in Ireland (by Total Assets)1 Total Savings & Loans (€bn) 1

Savings with credit unions remained resilient through the financial

crisis and are now above pre-crisis levels

Loan balances have been increasing since 2015, rising from €3.95bn in

Sep-2015 to €4.8bn in Sep-2018

Loan To Asset (LTA) ratio has risen steadily since 2016 to 28% as of

Sept-2018

The declining trend of the number of credit unions in Ireland

continues. Between December 2011 and December 2018 the

number of credit unions fell by 154 (406 to 252)

This reduction was largely driven by voluntary consolidation and a

limited number of resolution cases. This led to an increase in the

number credit unions with assets greater than €100m

(€bn)%

€13 €13 €12 €13 €12

€12 €12 €12

€12

€13

€13

€14 €15

€7 €7

€7 €7

€6

€6

€5

€4 €4.0 €3.9

€4.1€4.5

€4.8

17%

6%

28%

0%

10%

20%

30%

40%

50%

60%

€0

€2

€4

€6

€8

€10

€12

€14

€16

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sep-18

Savings (€bn) Loans (€bn) Reg Cap (%) Arrears (%) Loans to Total Assets (%)

223 225 219 215 213 205 196 181

148

97 73

58

168 165 168 165 163 167 169

168

157

147

141

140

29 28 28 29 30 27

28 31

37

48

54

54

420 418 415 409 406 399

393 380

342

292

268

252

-

50

100

150

200

250

300

350

400

450

-

50

100

150

200

250

300

350

400

450

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sep-18

Less than €20m €20-100m Greater than €100m Total

Source: 1. Department of Finance









Section 6: IBRC


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IBRC: Overview

IBRC: Timeline of Events

Established: • July 2011 following the merger of Anglo Irish Bank and Irish Nationwide Building Society

Purpose: • To manage the orderly wind down of the merged entity

Government Support: • Total invested in IBRC (Dec-2010): €34.7bn

Progress to date: • IBRC was placed in special liquidation in February 2013• Loans with a par value of €21.7bn have been prepared, brought to the market and sold• Liquidation generated €17bn of cash inflows to date• All admitted unsecured creditors will be paid 100% of the principal that was owed to them at the date of liquidation.

Overview

2009

• Following consultation with Central Bank and Department of Finance, the ‘Anglo Irish Bank Corporation Act 2009’ was passed to take Anglo Irish Bank into public ownership

• €4bn in ordinary shares invested in Anglo Irish Bank and €100m in Irish Nationwide (INBS)

2010

• €30.6bn additional capital injections in the form of promissory notes

• Brings total invested to €34.7bn across Anglo and INBS

2011

• Majority of deposits held in Anglo Irish Bank and INBS are merged to form Irish Bank Resolution Corporation (IBRC)

2013

• Following discussions between Irish Authorities and the ECB, the IBRC promissory notes are exchanged for long-term government bond

• Improves Ireland’s debt profile and decreases near team borrowing requirements

• IBRC placed into liquidation

2014/2015

• Liquidation generated €16.5bn of cash inflows to date

• Allows for payment of €14.7bn to IBRC’s creditors, including full repayment of €12.9bn of debt owed to NAMA

2016/2017/2018

• In December 2018, the Special Liquidators commenced payment of the final dividend of 50% to all admitted unsecured creditors of IBRC which represents the final instalment of the principal owed to this class of creditors as at the date of the liquidation of IBRC.

• Assessor appointed pursuant to the Anglo Irish Bank Corporation Act 2009




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IBRC Progress Update Report

Sales process by numbers

€21,700,000,000

64 15,900

>130,000 355

755,000

3,500 241 100%

174

OF LOANS PREPARED AND BROUGHT TO MARKET

LOAN SALES PROCESSES CONDUCTED

LOANS CONSISTED OF OVER

LETTERS ISSUED TO BORROWERS

AND GUARANTORS

INTERESTED PARTIES

ACROSS 13 COUNTRIES

DOCUMENTS WERE REVIEWED AND

UPLOADED TO VIRTUAL DATA ROOMS (“VDRS”)

PROPERTY VALUATIONS

WERE OBTAINED

INDIVIDUAL BIDS WERE RECEIVED

ACROSS 6 PORTFOLIOS

OF THE LOAN BOOK

TRANSACTED

NON DISCLOSURE AGREEMENTS (“NDAS”)

SIGNED WITH INTERESTED PARTIES

DIFFERENT BORROWER GROUPS

22

• The IBRC loan portfolio was supported by collateral based in 22 different jurisdictions worldwide

• Strong interest from a variety of financial and strategic buyers and funders, with US private equity houses and hedge funds being key participants across each of the portfolios.

Project PebbleUS CRE, UK hotels and UK

& Ireland Shopping Centres

■ Ireland/UK (84%)

■ US (15%)

■ World: other (1%)

Project Sand/PearlIrish originated Residential

Mortgages

■ Ireland (100%)

Project Evergreen Irish originated Corporate

Loans

■ Ireland (93%)

■ UK (7%)

Project SaltUK originated CRE Loans

■ Germany (60%)

■ UK (30%)

■ Poland (7%)

■ Europe: other (3%)

Project RockUK originated Commercial

Real Estate (“CRE”) Loans

■ UK (89%)

■ US (7%)

■ Germany (3%)

■ Europe: Other (1%)

Project StoneIrish originated CRE Loans

■ Ireland (46%)

■ United Kingdom (33%)

■ Continental Europe (18%)

■ Other (3%)Project Quartz

Irish originated CRE loans

■ Ireland (97%)

■ UK (1%)

■ Other (2%)

Project Amber / Amethyst

Corporate and CRE loans

■ UK (78%)

■ Ireland (22%)

Source: 1. IBRC Progress Update Report

Collateral was based

in 22 different jurisdictions

Sales Processes




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IBRC Liquidation Update

The most recent special liquidation progress update report was published in May 2018 giving a comprehensive overview of the work completed to date. It is available on the Department of Finance website www.finance.gov.ie. A further progress update report is expected in H1 2019

Asset realisation workstream largely complete. At this stage, loans with a par value of €21.7bn have been prepared, brought to the market and sold

As at the 31st December 2018, the Special Liquidators had a net cash balance of c. €1.26bn which will ultimately be available for distribution to creditors

In December 2018, the Special Liquidators commenced payment of the final dividend of 50% to all admitted unsecured creditors of IBRC. This payment represents the final instalment of the principal owed to this class of creditors, which includes the State, as at the date of the liquidation of IBRC in February 2013

An assessor was recently appointed pursuant to the Anglo Irish Bank Corporation Act 2009 to determine the fair and reasonable aggregate value of the transferred shares and extinguished rights and the consequent amount of compensation (if any) that may be payable to the previous shareholders

On 2nd April 2019 the Special Liquidators announced the successful agreement of the largest remaining piece of litigation impacting the liquidation of IBRC. This agreement should accelerate the finalisation of the liquidation in due course.

Recent Developments

Ongoing

Tasks

Liquidation update

Continued management of c. 119 legal cases

Completion of the creditor adjudication process

Expectation that that there will be further funds recoverable to the State following repayment of other creditors, including subordinated bondholders (dependent on a number of assumptions)

Management of the remaining loan book of c. €3.4bn

Realisation of all remaining assets

Assessor process expected to be completed by Q2/Q3 2019









Section 6: IBRC


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Financial AdvisoryAnalysis, insight and building connections

Insight Objective Analysis

Building Connections

Financial Advisory

Key objectives

The Financial Advisory team provides insight and analysis into emerging technologies and financial services, while helping to build connections between academia, public bodies, and private institutions

Blockchain & Virtual Currencies

Analysis & Insight

Conduct research into new developments in the financial services sector and nascent technologies. Research areas include: crowdfunding, seed & venture capital funding, blockchain and fintech

Co-hosted a conference with the European Investment Bank (EIB) that focused on improving access to finance for Irish companies (December 2018)

About

Coordinate and manage the Department’s Blockchain & Virtual Currencies Working Group

Regular engagement with academia, Enterprise Ireland, the IDA and private sector via the ‘Blockchain Ireland’ initiative

Authors of the Department’s discussion paper on blockchain & virtual currencies Co-founded the BlockW initiative (women in blockchain forum) Provide input at an EU and OECD level. In particular, at the EU Blockchain

Observatory & Forum and the EU Blockchain Partnership Hosted Ireland’s first Government Blockchain Hackathon (Blockathon Ireland) in

January 2019





Contacts

Head of Shareholding and Financial Advisory Division

Shareholding and Financial Advisory Division Contacts

Department of Finance Press Office

Des CarvilleEmail: [email protected]: +353 1 604 5326

Aidan MurphyEmail: [email protected]: +353 1 604 5531

AIB, BOI & PTSB Credit Unions Scott Rankin(Deputy Head) Brian CorrEmail: [email protected] Email: [email protected]: +353 1 604 5469 Phone: +353 1 604 5064

Financial Advisory NAMA, IBRC & HBFIMai Santamaria Gary HyndsEmail: [email protected] Email: [email protected]: +353 761007728 Phone: +35316045308

mailto:[email protected]






Documents

Shareholding and Financial Advisory Division (SFAD) · The Shareholding and Financial Advisory Division (SFAD) consists of a team of c. 20 professionals with a mix of capital markets,